Hi,
I am still not sure what I should do next. Here is my situation:
I purchased the house I now live in about 6 years ago for $175K but it is now valued at $340K. The residual loan amount is aroun $150K so my equity is conservatively more than $150K.
Recently my wife and I inherited $60K from the settlement of a family estate.
I believe that I can rent my current house for $300+ pw based on current market prices.I am not quite sure what to do. My initial thoughts were to move out, pay an intial $10K out of the current cash windfall on this property and then refinance and rent my current house out at $300 pw which would leave me with around $2000pa after rates and property management.
My wife however is keen on moving onto a house on acreage out of town which would mean either selling completely and buying anew (including the $60K we now have) something around the $350K mark which would leave us in almost the exact same financial situation we are currently in (minus stamp duty etc). Or we could keep the current property and finance the full amount for our next residence leaving us with twice the repayments of our current house but with a positively geared property being paid off by the tenant. I actually have enough surplus income to fund this fairly easily.
I thought there may be an option to rent for a couple of years with an option to buy. I believe that this would leave me with a couple of years to use the $2000 per month surplus income + $50K of the inheritance to finance additional positively geared properties). Plus it would satisfy my wifes urge to move onto acreage and not be too concerned about settling, small improvements etc.
Anyone got any ideas on other options, or advice on this option. All risk is mine at the price of free advice of course. I have a feeling that keeping the existing property + purchasing a new one equals gratification now at the expense of cashflow which could be used to finance additional properties.
I am only new to this and I am thoroughly confused as to which way to go.
Of course the final option is to plow the windfall into my current house + my surplus income and pay it off in 5 years.
If you want to upgrade your home, I would sell it and pile all your equity and estate money into your principal home (PPOR).
Then use the equity in your home to 100% finance an investment property.
The thing to understand is that interest paid on your home is not tax deductible whereas money borrowed for investment purposes is tax deductible.
IMO acreage is over rated, too much bl**dy mowing!
Depending on how old you are you might think of setting yourself up in a cosy unit in a quiet country town and use the money to accelerate your wealth for retirement!!electron, you could purchase your new acreage house, and keep your current one as an IP. I would immediately make your current home into an interest only loan, with an offset account, and have all extra money sitting in that account.
when you do buy your acreage, pay all surplus cash (including extra rental) into that loan to pay it off as quick as you can. then use any extra equity to borrow to purchase CF+ houses – or even neutral ones if you have income to service all debts etc.
Otherwise, do as yack suggested, and sell current PPOR – tax free, buy your new house, and then turn around and invest in properties.
Cheers
Mel
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